Introduction to NIO

NIO is a pioneer in China's luxury high-end smart electric vehicle market. NIO designs, manufactures and sells high-end luxury electric vehicles with artificial intelligence. NIO currently owns 3 SUV lines, and is putting into use 1 sedan line. All NIO vehicles have self-driving mode, using electric batteries that can be charged at home, on-site charging service, or special automatic replacement at stations provided by NIO and its partners.

In addition to revenue from vehicle design and manufacturing, NIO also earns money from autopilot service subscriptions and battery services. For a sedan that sells for $68,000, NIO can make an additional $12600 over 10 years from its services. NIO is the only electric vehicle company in the world that applies the battery replacement service at the station, users can take the car to the station and completely change the battery within 3-5 minutes; This business strategy is said to change the concept and habits of car users.

NIO is currently operating in the Chinese market, but has plans to expand to Europe and the US in the next 1-3 years.

China market: The Chinese market is the largest electric car market in the world by far. Moreover, the Chinese government is gradually stepping up the policy of using electric cars by limiting the number of registered cars, but not applying the limit if the cars are electric. The total number of electric vehicles sold in China increased from 1.2 million in 2019 to 2.4-3.5 million in 2022, accounting for 11-14% market share of total vehicle sales.

The company's growth potential: in 2020, NIO produced and sold 43728 vehicles, an increase of 112% compared to 2019 (production capacity was lower than orders). In 2021 it is expected to produce 150000 vehicles (an increase of more than 200%), and in 2022 it can be produced 300000 vehicles.

Stock Rating:

NIO was rated by 12 analysts from different mutual funds, with 7 buy and 5 hold ratings, with an average stock value of $57.61 over 12 months, peaking at $70. and as low as $30.

Evaluation of Q4 2020 results (reported early March 2021):

  • The number of vehicles delivered to customers was 17353, compared to 12,206 vehicles in the third quarter of 2020.

  • Gross profit was 17.2%, compared to 12.9% in Q3 2020

  • Plan for the first quarter of 2021: expected to deliver 20000 - 20500 vehicles (up 15% compared to the fourth quarter of 2020).

Evaluation of Q1 2021 results (reported early May 2021):

Ahead of the report of Q1 2021 results, analyst Rakesh of Mizuho investment fund makes some assessments as follows (April 20, 2021):

  • Despite facing the problem of lack of semiconductor chips, NIO is forecast to still be able to double the number of vehicles sold by the end of this year. Rakesh forecasts 87,000 vehicles delivered in 2021, 141,000 vehicles in 2022 and 223,000 vehicles in 2023.

  • Rakesh believes that one of the strengths that helps NIO grow is the battery replacement station array. Over the next four years NIO could increase the number of stations from 500 to 5000, through cooperation with state-owned enterprise partners. In addition, the fact that NIO allows Ford users to use its power station also helps generate revenue for NIO.

  • Rakesh estimates NIO will make $5.2 billion and lose $0.29 a share this year, but will grow revenue 85% to $9.6 billion by 2022 and start to profit ($0.14 per share).

  • NIO's stock rating is based on revenue rather than profit. Rakesh gives NIO a $60/share rating, 8.8x 2022 revenue (instead of 428x 2022 earnings).

Actual results:

  • In the first quarter of 2021, NIO delivered 20060 vehicles, an increase of 424% compared to the same quarter of the previous year (15.6% compared to the fourth quarter of 2020).

  • Total revenue (revenue) reached $1218.3 million, up 481.8% year-on-year (20.2% compared to Q4 2020).

  • Profit per vehicle was 21.2%, compared with negative 7.4% in the same quarter a year ago, and 17.2% compared to the fourth quarter of 2020.

  • Gross profit was 19.5%, compared to negative 12.2% in the same quarter a year ago, and 17.2% in Q4 2020.

Vision for Q2 2021 (results to be reported around July):

  • It is expected to hand over about 21,000 - 22,000 vehicles, up 103 - 113% over the same quarter last year, and up 5-10% compared to the first quarter of 2021.

  • Total revenue (revenue) reached $1243.3 million - $1298 million, up 119% - 128.7% year-on-year, and 2.1 - 6.5% higher than the first quarter of 2021.

Comments from the CEO on the lack of semiconductor chips:

  • Demand for NIO's products continues to grow, however the company faces the problem of semiconductor chip shortages that the whole world is suffering. Due to a fire at the Renesas chip factory in Japan, NIO is expected to be hardest hit this May (in terms of production). However, the CEO thinks that the chip problem for the whole industry will be less difficult in the third quarter of this year.